Labor and the Greens strike a deal on housing taxes — here's what changes
Labor and the Greens strike a deal on housing taxes — here's what changes
Labor and the Greens have done a deal. Labor will change how capital gains tax and negative gearing work, and will restrict how much money self-managed super funds can borrow to buy rental properties. After months of negotiating, both sides have got something they wanted.
For the Greens, this is a win they've been pushing for since at least 2024. They've always argued that capital gains tax breaks and negative gearing make houses more expensive. When Labor introduced the Help to Buy bill in February 2024, the Greens flagged both these tax breaks as their main negotiating demands. By September, a Greens media release showed Labor was already thinking about moving on both issues. So the deal itself is not a shock.
The Greens say these two tax breaks cost Australians $157 billion over ten years. They put the capital gains tax discount alone at $60 billion. Those are the Greens' own numbers, and Labor will probably argue about the exact figures. But everyone agrees the costs are huge — the government's own tax reports have long said both of these tax breaks are among the biggest holes in the budget.
How negative gearing and capital gains tax work (briefly)
Most people don't need to know this, but it helps. When you own an investment property and it loses money — the rent doesn't cover the mortgage and costs — you can write off those losses against other income. That's negative gearing. It means you pay less tax overall.
Capital gains tax is what you pay when you sell something for more than you paid for it. Right now, if you've owned the asset for over a year, you only count half the profit as taxable income. That's the CGT discount. So if you sell a rental house you've owned for five years and make $100,000 profit, you only pay tax on $50,000. Labor and the Greens want to change both of these arrangements, but the exact changes won't be clear until they write the actual laws.
The self-managed super fund piece
The other part of the deal targets self-managed super funds — SMSFs. These are super funds that people run themselves instead of using a bank or insurance company.
Right now, SMSFs can borrow money to buy investment properties. This is called a limited recourse borrowing arrangement, or LRBA. The SMSF sector borrows about $28.9 billion this way, out of roughly $75 billion in total SMSF assets. That's a lot of money, and the property industry has reacted badly — "insanity" was one description making the rounds.
The concern is straightforward. Property developers say that SMSF buyers account for up to 30 per cent of apartment sales in some areas. If you cut off that borrowing, you lose a whole chunk of buyers just when the government is trying to build more apartments. There's a real tension here: Labor wants more housing, but this deal restricts one of the ways people have been financing apartment purchases.
The idea of stopping this borrowing is not new. Back in 2014, a government inquiry recommended removing these borrowing arrangements from the super system. The argument was that letting people borrow inside a super fund — which gets tax breaks — concentrates too much money in property and makes the system riskier. That argument has never gone away. What's changed is politics. The Greens wanted housing tax changes, and Labor can now say it's tightening super fund rules rather than hiking taxes.
What happens next
The details matter enormously. "Changing negative gearing" could mean old properties still get the break but new ones don't. Or it could mean the break gets smaller, or disappears entirely. Same with the capital gains tax discount — it could go down from 50 per cent to 25 per cent, or get scrapped altogether. Until the budget bills are written and tabled, no one really knows.
What's concrete is that the Greens have got a real policy win, not just a promise to think about it later. Whether this deal actually works the way both sides expect, and whether stopping SMSF borrowing really does kill apartment sales — those are the questions that matter now.
The property industry will spend the next few weeks arguing that stopping SMSF borrowing is bad for housing supply. The Greens will argue the opposite. Probably both will have a point. That's how these negotiations usually play out.
